There are plenty of stocks trading on historically high dividend yields, particularly amongst mining and mining service stocks, but of course that is just a reflection of the past – it doesn't necessarily tell you much about the future.
In fact, if anything, an above average yield is most likely telling you that the future dividend is expected by the market to be lower!
In other words, be wary of stocks with excessively high yields because if it seems too good to be true, then it probably is!
The key for investors wanting to purchase high-yielding income stocks is to focus on the forecast rather than the trailing dividend yield as this gives a truer picture of what to expect.
Given the inherent difficulties with forecasting earnings growth, income investors will usually be best off sticking with companies that have predictable earnings.
Generally speaking, it is the larger, more established companies that have more predictability. For this reason I have chosen to limit my search for attractive income stocks to within the 100 Leading Industrials.
Here are three stocks with high fully franked dividend yields based on forecast data supplied by Morningstar. Importantly, these dividend payments should be maintainable and are in fact forecast to grow over the next two years.
- Australia and New Zealand Banking Group (ASX: ANZ) is forecast (according to Morningstar data) to pay a dividend of 184.8 cents per share (cps) in financial year (FY) 2016. With the share price well off its 52-week high at $28.75, the stock is offering a salivating yield of 6.4%
- Telstra Corporation Ltd (ASX: TLS) is trading near its 52-week low with the share price currently at $5.58. With a forecast dividend payment in 2016 of 31.5 cps, Telstra is available on a forecast yield of 5.6%.
- IOOF Holdings Limited (ASX: IFL) shares are also currently trading well off their 52-week highs. With a forecast dividend of 57.7 cps in FY 2016 and the share price at $9.18, this implies a solid dividend yield of 6.3%.
